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Indian State Requests Mineral Resources Tax

by Mary Swire, Tax-News.com, Hong Kong

06 September 2011


The Chief Minister of the Indian State of Orissa, Naveen Patnaik, has asked the Prime Minister to impose a mineral resource rent tax on iron ore. He has suggested that the levy is fixed at 50% of the surplus rent.

Orissa has more than 35% of India’s iron ore reserves and the State Government is keen to see natural resources being kept at home and the potentially huge amount of money to be made not just benefitting a small group of mining companies.

With the current high demand for iron ore by the steel industry, there is increased pressure on the Indian Government to keep resources in the country. It has, therefore, raised export taxes considerably to discourage the shipping of the product elsewhere.

In Mr Patnaik’s letter to Manmohan Singh, he said that in less than a decade iron ore prices have increased more than ten fold, and that this was generating windfall gains far exceeding the level of investment or risk involved in the activities. He was concerned about the huge profits accruing to private mining companies.

Mr Patnik suggested that India adopts a similar levy to the controversial Australian Mineral Resource Rent Tax of 30%, which takes effect from July 1, 2012.

“On the same lines, a Mineral Resource Rent Tax should be levied on iron ore, to be charged at 50% of the surplus rent, and should accrue to the states. As and when the surplus rent decreases the tax too will automatically decrease,” he wrote.

He argued that the extra revenue could be invested in infrastructure and jobs, and so improve the livelihood of those living in Orissa.

TAGS: tax | business | India | mining | royalties

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